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The slowdown cometh

by New Deal democrat

The slowdown cometh

I submitted a long post on the above to Seeking Alpha. They haven’t put it up yet. When they do, I’ll link to it here.   UPDATE: Here’s the link.

Long story short: you all know that a year ago I forecast a slowdown by about mid-year this year. Everything except for portions of GDP and jobs has acted in accordance with that forecast.

And, judging by this morning’s ADP jobs report for May:


the official jobs report may finally follow suit this Friday

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“While Considering Medicare For All: Policies For Making Health Care In The United States Better”

Robert Kocher and Donald M. BerwickWhile Considering Medicare For All: Policies For Making Health Care In The United States Better,” Health Affairs

Dr. Donald Berwick is the former Director of Medicare and Medicaid who talked about waste in Medicare and Doctors knowing such waste exists.

“It is unlikely that the United States will move quickly to a full publicly financed health insurance when Congress next considers health policy after the 2020 presidential election. Despite its theoretical advantages, passage of Medicare for All would require a massive political battle to make feasible the shift from private to public funding, to develop enough public trust to expand an entitlement program for all Americans, and to mitigate the disruption for many of substituting public insurance for familiar, existing health insurance policies. The transition will take time.”

Improving Affordability

Donald Berwick’s direction on Medicare was this: While US health care can and should be made more affordable by attacking waste, innovating in delivery system design, and improving productivity, these mechanisms are unlikely to achieve affordability quickly. He comes back with other comments which can be quicker in implementing.

• Lower the cost of health insurance for more Americans: Two types of financial assistance were implemented in the form of premium and cost-sharing subsidies. Sliding-scale premium subsidies reduced the monthly cost of insurance substantially when they phase in for people with incomes at 133 percent of the federal poverty level up till 300% FPL and phased out at 400 percent of poverty. 400% of income was $100,400 for a family of four in 2019. With an average silver-level insurance plan, the costs for healthcare insurance were $15,855 or 16 percent of income. It is recommended, no American should spend more than 10 percent of income on insurance premiums.

Cost-sharing subsidies were available to those with incomes up to 250% of poverty, average deductibles have risen to $3,000, and total out-of-pocket costs are capped at $7,900. The deductibles and out-of-pockets was done so as to give patients some skin-in-the-game and not abuse insurance. “Skin-in-the-game,” are regressive actions which disproportionately penalize people with chronic diseases. The authors recommend eliminating all cost sharing for people with incomes below 250% of poverty. For people with incomes from 251 percent to 1,000% of poverty, the authors suggest a sliding-scale of subsidies similar to the current program. Instead of annual appropriations, we would make these subsidies mandatory expenditures to replace annual appropriations and prevent an Executive Branch from using the funding of these benefits as a political weapon.

• Reduce insurance premium growth rates by limiting hospital prices. As I wrote in Again, Healthcare Cost Drivers Pharma, Doctors, and Hospitals, the biggest driver of healthcare cost is simply “pricing” increases reflected in hospitals and pharmaceuticals. These increases are reflected in insurance premiums. As the authors also point out, the biggest driver of premium increases has been in hospital price increases which have risen 42% between 2007 to 2014 and far greater than physician prices.

The ACO strategy has allowed hospitals to exploit the market through consolidation thereby eliminating competition to raise prices and enabling the employment of specialist doctors, making them “must haves” in insurance networks. As planned, the consolidation should have generated administrative cost synergy and quality benefits instead of enabling healthcare to consolidate and control prices. The authors believe no hospital should be able to charge prices that equal more than Medicare prices plus 20 percent, which is far less than many charge today (plus 89% on average) also far, far less than the 200 to 240% for hospitals in Michigan for catastrophic automobile accidents recently signed into law. The authors claim the plus 20% is enough revenue to offset Medicaid underpayments and provide incentive to be more productive. Indexing hospital prices to the Consumer Price Index rather than medical inflation, hospitals are not perversely rewarded for lower levels of productivity improvement than the rest of the economy. It is recommended, hospitals with greater than 40% market share in a given area would be required to contract with all health plans so that they cannot limit choice and competition.

• Make medications more affordable. As I noted in “ Again, Healthcare Cost Drivers Pharma, Doctors, and Hospitals,” from 1996 to 2013 in one JAMA study, healthcare costs increased by ~$1 trillion of which 50% was due solely to pricing increases. The big issue is the change in pricing for in and out patient hospital stays/care and pharmaceuticals. Hospital/clinic consolidations leads to the former even though insurance has been fighting for a reduction in stays. Pharmaceutical has instituted new pricing strategies which we have all read about in the news. Old drugs such as Humalog, Vimovo, and the infamous EpiPens as well as others are now vastly more expensive. This study points to pricing for pharma and service as one of the issues.

The authors recommend; a ban on rebates to all insurance markets and not just Medicare; reducing the period of market exclusivity for biologic drugs from 13 years to 7 years to enable generic competition sooner since biologic drugs are the most expensive drugs accounting for 70 percent of spending growth from 2010 to 2015; and adopting the Trump administration’s proposed international market basket pricing approach to set the upper limit for drug prices.

Improving Access

Improve the risk pool of people buying coverage and make Medicaid more universal.

• Create larger, lower-cost, healthier risk pools to reduce premiums. Reimpose the Individual Mandate to create larger, lower-cost, and healthier risk pools thereby reducing premiums. Since subsidies would be more generous, the penalty for not buying insurance would be larger. Short-term three-year plans would be eliminated. Reinstate the coverage of essential health benefits in all plans.

• Expand the use of reinsurance. Reinsurance lowers premiums by reimbursing plans for medical expenses for the most expensive patients These expenses do not have to be offset by premium increases from healthier patients.

• Improve Medicaid access. Medicaid provides comprehensive insurance for 74 million Americans and in some states, coverage is dropping as a result of work requirements besides other barriers to enrollment and reenrollment. The authors would eliminate Medicaid cost sharing as even small amounts of cost sharing can reduce the use of necessary services and increase wait times for enrolling in Medicaid coverage after losing commercial insurance. We would encourage the 14 states that have not expanded Medicaid to accept federal funds to expand their programs and urge the administration to accept waivers from these states, with the exception of work requirements, cost sharing, or other policies that undercut the core mission of Medicaid.

Improve Health Care Quality

The provisions in the ACA were designed to switch “volume” (fee for service) to “value” (getting paid for better outcomes). Accountable care organizations and bundled payments were two such innovations put in place to do such. They appear to have had mild and directionally desirable impact on both quality and cost. There is still more to learn.

The Institute of Medicine has categorized six defects in the quality of care resulting in excess cost. Problems in patient safety, unscientific variations in care leading to ineffective treatment, lack of patient-focus, unwarranted delays due to poor system designs, excessive prices due to lack of transparency and open competition, and fraud all of which lead to wasted resource, bad patient outcomes, and decreased value. The switch from volume to value will alleviate these defects.

The authors endorse the creations of the Center for Medicare and Medicaid Innovation to sponsor tests of new payment models and delivery system designs such as home and community-based alternatives to hospitalization, telemedicine, and the integration of behavioral health into the care mainstream. Renewed efforts to improve patient safety through innovations in training, equipment, and job roles.

Stakeholders have become enthusiastic in spending health care dollars to mitigate the power of “social determinants of health” such as housing, food availability, exercise patterns, precursors of substance abuse, early childhood trauma, and more. The authors strongly favor action and funding in that direction.

Other Issues

• Reform medical malpractice policy. Eliminate the excuse medical malpractice necessitates wasteful extra tests and treatments encouraging doctors to adopt risk-based payment models and more parsimonious approaches to care. I do have a problem with this as many states have put in place limits to malpractice. The authors have suggested a safe-harbor when doctors adhere to clinical guidelines and evidence-based care. Is malpractice a big issue? Public Citizen’s “ The Medical Malpractice Scapegoat;” details the data from 2015, (most recent full year for available data) the medical malpractice payments on behalf of doctors amounted to about 0.2 percent of costs for hospital and physician services and about 0.1 percent of all healthcare costs. The number of payments on behalf of doctors in 2015 was the lowest on record and is lower than what it was during Clinton or Bush.

• Protect Americans from surprise bills. The authors would require all doctors who provide care at in-network hospitals or outpatient facilities to bill patients at average in-network prices.

The authors believe this portfolio represents a set of policies that could be supported at least somewhat on a bipartisan basis and believe are likely to be effective and in the short term more politically viable than Medicare for All.

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Tariffs and Monetary Policy: Moral Hazard and Rent Seeking

Tariffs and Monetary Policy: Moral Hazard and Rent Seeking

President Trump’s threat to impose tariffs on Mexico over immigration has pushed Federal Reserve Chair Jay Powell to say that if the tariffs lead to economic growth slowing, the Fed will cut interest rates.  While the bump may be about to end, this announcement was followed by a  solid global surge of stock markets on June 4 followed by smaller increases the next day.  This sets up a moral hazard situation for Trump where if he behaves irresponsibly on trade policy (with even GOP senators basically freaking out), the Fed might bail him out with interest rate cuts.

How is rent seeking entering into this?  I note a point just made by Dean Baker, that all these tariffs Trump is imposing on his own without any Congressional approval offer him the option of allowing specific exemptions from them.  So Trump can grant exemptions to specific sectors or even firms that favor him.  So Trump’s trade wars are opening up a whole new vista for rent seeking.

Finally, and unsurprisingly, many of his trade policies look to fail to achieve their supposed goals.  This is pretty obvious for the case of the tariffs on Mexico, which by potentially weakening the Mexican economy weaken Mexico’s ability to reduce Central Americans from to the US.  Another case involves the Chinese firm Huawei, supposedly both to enhance US national security and support the US high tech sector.  But according to a story in the Washington Post, 6/5/19 reports that 61 percent of experts say that Trump’s ban on US firms supplying parts to Huawei will both weaken US national security by reducing US influence over Huawei and the whole 5G sector, with the relevant US firms being hurt.  I do not think even the Fed can bail the US economy out from this mess.

Barkley Rosser

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ISM manufacturing and residential construction spending trends continue

ISM manufacturing and residential construction spending trends continue

May data has started out where April left off, with continuations of trends in both manufacturing and construction.

First, manufacturing: it is still expanding, but at a much lower rate than last summer’s red hot numbers. The overall ISM manufacturing index declined a bit to 52.1, but the leading new orders sub-index rose slightly from 51.7 to 52.7:

Looking forward to Friday’s employment report, the ISM employment sub-index also rose slightly from 52.4 to 53.7. This suggests that Friday will show an increase in the leading manufacturing jobs sector.

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Keynes’s Private Letter to Roosevelt

From Brad. My bold

To Franklin Delano Roosevelt, 1 February 1938

Private and personal

Dear Mr. President,

You received me kindly when I visited you some three years ago that I make bold to send you some bird’s eye impressions which I have formed as to the business position in the United States. You will appreciate that I write from a distance, that I have not revisited the United States since you saw me, and that I have access to few more sources of information than those publicly available. But sometimes in some respects there may be advantages in these limitations! At any rate, those things which I think I see, I see very clearly.

(1) I should agree that the present recession is partly due to an ‘error of optimism’ which led to an overestimation of future demand, when orders were being placed in the first half of this year. If this were all, there would not be too much to worry about. It would only need time to effect a readjustment;—though, even so, the recovery would only be up to the point required to take care of the revised estimate of current demand, which might fall appreciably short of the prosperity reached last spring.

(2) But I am quite sure that this is not all. The recovery was mainly due to the following factors:—

(i) the solution of the credit and insolvency problems, and the establishment of easy short-term money;

(ii)the creation of an adequate system of relief for the unemployed;

(iii) the public works and other investments aided by Government funds or guarantees;

(iv) investment in the instrumental goods required to supply the increased demand for consumption goods;

(v)the momentum of the recovery thus initiated.

Now of these (i) was a prior condition of recovery, since it is no use creating a demand for credit, if there is no supply. But an increased supply will not of itself generate an adequate demand. The influence of (ii) evaporates as employment increases, so that there is a dead point beyond which this factor cannot carry the economic system. Recourse to (iii) has been greatly curtailed in the past year. (iv) and (v) are functions of the upward movement and cease—indeed (v) is reversed—as soon as the position fails to improve further. The benefit from the momentum of recovery as such is at the same time the most important and the most dangerous factor in the upward movement. It requires for its continuance, not merely the maintenance of recovery, but always further recovery. Thus it always flatters the early stages and steps from under just when support is most needed. It was largely, I think, a failure to allow for this which caused the ‘error of optimism’ last year.

Unless, therefore, the above factors were supplemented by others in due course, the present slump could have been predicted with absolute certainty. It is true that the existing policies will prevent the slump from proceeding to such a disastrous degree as last time. But they will not by themselves—at any rate, not without a large-scale recourse to (iii)—maintain prosperity at a reasonable level.

(3) Now one had hoped that the needed supplementary factors would be organized in time. It was obvious what these were—namely increased investment in durable goods such as housing, public utilities, and transport. One was optimistic about this because in the United States at the present time the opportunities, indeed the necessities, for such developments were unexampled. Can your Administration escape criticism for the failure of these factors to mature?

Take housing. When I was with you three and a half years ago the necessity for effective new measures was evident. I remember vividly my conversations with Riefler at that time. But what happened? Next to nothing. The handling of the housing problem has been really wicked. I hope that the new measures recently taken will be more successful. I have not the knowledge to say. But they will take time, and I would urge the great importance of expediting and yet further aiding them. Housing is by far the best aid to recovery because of the large and continuing scale of potential demand; because of the wide geographical distribution of this demand; and because the sources of its finance are largely independent of the stock exchanges. I should advise putting most of your eggs in this basket, caring about this more than about anything, and making absolutely sure that they are being hatched without delay. In this country we partly depended for many years on direct subsidies. There are few more proper objects for such than working-class houses. If a direct subsidy is required to get a move on (we gave our subsidies through the local authorities), it should be given without delay or hesitation.

Next utilities. There seems to be a deadlock. Neither your policy nor anybody else’s is able to take effect. I think that the litigation by the utilities is senseless and ill-advised. But a great deal of what is alleged against the wickedness of holding companies is surely wide of the mark. It does not draw the right line of division between what should be kept and what discarded. It arises too much out of what is dead and gone. The real criminals have cleared out long ago. I should doubt if the controls existing today are of much personal value to anyone. No one has suggested a procedure by which the eggs can be unscrambled. Why not tackle the problem by insisting that the voting power should belong to the real owners of the equity, and leave the existing organizations undisturbed, so long as the voting power is so rearranged (e.g. by bringing in preferred stockholders) that it cannot be controlled by the holders of a minority of the equity?

Is it not for you to decide either to make a real peace or to be much more drastic the other way? Personally I think there is a great deal to be said for the ownership of all the utilities by publicly owned boards. But if public opinion is not yet ripe for this, what is the object of chasing the utilities around the lot every other week? If I was in your place, I should buy out the utilities at a fair price in every district where the situation was ripe for doing so, and announce that the ultimate ideal was to make this policy nation-wide. But elsewhere I would make peace on liberal terms, guaranteeing fair earnings on new investments and a fair basis of valuation in the event of the public taking them over hereafter. The process of evolution will take at least a generation. Meantime a policy of competing plants with losses all round is ramshackle notion.

Finally, the railroads. The position there seems to be exactly what it was three or four years ago. They remain, as they were then, potential sources of substantial demand for new capital expenditure, Whether hereafter they are publicly owned or remain in private hands, it is a matter of national importance that they should be made solvent. Nationalise them if the time is ripe. If not, take pity on the overwhelming problems of the present managements, And here too let the dead bury their dead. (To an Englishman, you Americans, like the Irish, are so terribly historically minded!)

I am afraid I am going beyond my province. But the upshot is this. A convincing policy, whatever its details may be, for promoting large-scale investment under the above heads is an urgent necessity. These things take time. Far too much precious time has passed.

(4) I must not encumber this letter with technical suggestions for reviving the capital market. This is important. But not so important as the revival of sources of demand. If demand and confidence reappear, the problems of the capital market will not seem so difficult as they do today. Moreover it is a highly technical problem.

(5) Businessmen have a different set of delusions from politicians, and need, therefore, different handling. They are, however, much milder than politicians, at the same time allured and terrified by the glare of publicity, easily persuaded to be ‘patriots’, perplexed, bemused, indeed terrified, yet only too anxious to take a cheerful view, vain perhaps but very unsure of themselves, pathetically responsive to a kind word. You cold do anything you liked with them, if you would treat them (even the big ones), not as wolves or tigers, but as domestic animals by nature, even though they have been badly brought up and not trained as you would wish. It is a mistake to think that they are more immoral than politicians. If you work them into the surly, obstinate, terrified mood, of which domestic animals, wrongly handled, are so capable, the nation’s burdens will not get carried to market; and in the end public opinion will veer their way. Perhaps you will rejoin that I have got quite a wrong idea of what all the back-chat amounts to. Nevertheless I record accurately how it strikes observers here.

(6) Forgive the candour of these remarks. They come from an enthusiastic well-wisher of you and your policies. I accept the view that durable investment must come increasingly under state direction. I sympathise with Mr Wallace’s agricultural policies. I believe that the SEC is doing splendid work. I regard the growth of collective bargaining as essential. I approve minimum wage and hours regulation. I was altogether on your side the other day, when you deprecated a policy of general wage reductions as useless in present circumstances. But I am terrified lest progressive causes in all the democratic countries should suffer injury, because you have taken too lightly the risk to their prestige which would result from a failure measured in terms of immediate prosperity. There need be no failure. But the maintenance of prosperity in the modern world is extremely difficult; and it is so easy to lose precious time

I am, Mr President

Yours with great respect and faithfulness,

J.M. Keynes

References

John Maynard Keynes (1938), “Letter of February 1 to Franklin Delano Roosevelt,” in Collected Works XXI: Activities 1931-1939 (London: Macmillan).

my comment. Notice how the focus on housing was abandoned by later Keynesians. Housing is key to the business cycle (and to the effects of monetary policy which were not Keynes’s interest at all when the economy was in a liquidity trap). Yet somehow, investment in macro models is always business fixed investment.

The point is that, in 1938, Keynes gave the excellent advice for what to do in 2008. He was ignored then and ignored again in 2008 (except by Brad).

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The sources of the next recession

The sources of the next recession

While we are waiting for the ISM May manufacturing survey and construction spending data to be released later this morning, both of which will give us important clues to Friday’s jobs report, let me write down some thoughts on the nerdy question I ruminated about this weekend: what is the most likely source of the next recession?

I should start by noting that I remain on “recession watch” for later this year, as in, a substantially heightened risk, due to enough of the long leading indicators turning negative by the end of last year. But my base case remains that there will be a slowdown without an actual recession, because those indicators haven’t gone down *enough* and some, like real M1 and some housing metrics, have already rebounded.

But I read a tweet over the weekend from a political source I respect, who essentially said, “housing’s fine, there will be no recession, end of story,” and, well, I was annoyed.

That’s because housing isn’t always the source of a recession, and occasionally, as in 2000-01, it doesn’t turn down very much at all. In fact, housing has turned down since the beginning of last year about as much as it turned down in 2000 – which didn’t prevent the 2001 recession, did it?

So what are other sources of recessions? Here’s my take:

 

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Pfizer, Embrel, and Alzheimer’s

I’m getting my medical news from the front page of The Washington Post where Christopher Rowland discusses the possiblity that embrel, an anti arthritis drug, reduces the risk of Alzheimer’s dementia.

The issue is clearly incredibly important. The article raises interesting ethical, economic, statistical, and biological questions.

Better to click the link, but I will attempt a quick summary. There is evidence from anonymized insurance claims records that people who take Embrel for arthritis are less likely to develop Alzheimer’s. This hypothesis could be tested against the null of no effect with a huge long lasting extremely costly clinical trial. The patent on Embrel is about to expire. Obviously the Pfizer executives decided not to fund the trial. They also didn’t publish the retrospective study (it seems someone leaked it to Rowland).

I am most interested in the biology. Pfizer claims that they decided this, because of scientific evidence that Embrel wouldn’t work. In particular it does not cross the blood brain barrier. The argument is that it can’t help the brain without entering the brain. This is nonsense.

Embrel binds the appealingly named but nasty protein hormone tumor necrosis factor alpha (TNF-alpha). TNF-alpha promotes inflamation. It has a role in fighting tumors. It also causes cachexia wasting away of cancer patients and tuberculosis patients. It was discovered two ways. One group was purifying the wonderful TNF, the other the evil cause of cachexia which they called Cachexin. Both were surprised to discover they had purified the exact same molecule.

embrel binds and blocks TNF-alpha. It is a soluble form of the TNF-alpha receptor which competes with actual receptors which send a signal to cells when they bind TNF-alpha. It is a very important treatment for rheumatoid arthritis.

I say it doesn’t matter than embrel doesn’t enter the brain, because TNF-alpha does. If embrel binds TNF-alpha the dimer doesn’t enter the brain. If TNF-alpha in the brain causes Alzheimer’s then Embrel can reduce the risk by inactivating TNF-alpha which would enter the brain (also keeping it out of the brain but that doesn’t matter).

Pfizer’s argument is like saying that strangling someone can’t cause brain damage, because the strangler’s hands don’t enter the brain. They block oxygenation of hemoglobin which does enter the brain. The argument is silly (and effectively refuted by Rowland and scientists he interviewed).

I mean it’s obvious that inflammation spreads. That’s why cold viruses in your nose make you feel aches and pains all over (that one is interferon not TNF-alpha but the logic is the same).

There is fairly extensive evidence that inflammation has a key role in Alzheimer’s.

Of course the economics is also very clear. A huge investment in finding a new use for a molecule whose patent is about to expire is absolutely inconsistent with any duty to shareholders. This is clearly a case in which the government should fund the trial.

The statistical or methodological issue is that doctors will not trust non experimental evidence. The FDA has very strict rules for approval of a new pharmaceutical and for advertizing a new use of a pharmaceutical. They do not have to be applied to the decision of whether to prescribe a pharmaceutical off label (not for the use for which it was approved) but they are. The idea is that prescribing something with known and very minor side effects without knowing it will work is irresponsible. The logic is completely different from maximizing the expected welfare of the patient (in this case the healthy adult).

The idea that non experimental evidence is highly suspect and to be used only to propose experiments is alien to me. The rules which are called medical ethics seem to me to have very little relationship with the actions which are, in fact, morally right and morally wrong.

I think everyone should take Embrel (as soon as it is off patent and affordable). I also think there really should be a publicly funded clinical trial (which will be possible because no one will take the advice I gave in the past paragraph).

update: pulled back from comments. My knowledge of US pharmaceutical regulation is out of date (30 months out of date, but that’s out of date). I said non experimental data should be considered. So did Congress and Barack Obama and their signed act is law.

Run75441
June 5, 2019 6:59 am
It became far easier to bring things to market under the recent passage of the 21st Century Cures Act.

“The 21st Century Cures Act modified the FDA Drug Approval process. It was intended to expedite the process by which new drugs and devices are approved by easing the requirements put on drug companies looking for FDA approval on new products or new indications on existing drugs. For instance, under certain conditions, the act allows companies to provide “data summaries” and “real world evidence” such as observational studies, insurance claims data, patient input, and anecdotal data rather than full clinical trial results.”

Pharma R&D is given the normal tax break also.

Someone is lying.

The 21st century cures act

Pfizer might have decided not to publish the data back before December 13 2916. In any case, they don’t need FDA approval to publish data (1st amendment and all that). They need approval to advertise a new use of Embrel, but they can publish the data.

It seems clear that their problem is that Embrel is going off patent and will soon just be competition for their newer still on patent drugs. The news is out (as of yesterday on the front page of the Washington Post).

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The Rise and Fall of FDI

by Joseph Joyce

The Rise and Fall of FDI

After the global financial crisis,  international capital flows contracted, especially bank lending in Europe. Foreign direct investment (FDI) by multinational firms, however, provided a steady source of external finance, particularly for emerging market economies. The McKinsey Global Institute has calculated that the global stock of FDI increased from 46% of world GDP in 2007 to 57% in 2016 ($25 trillion to $41 trillion). But FDI flows fell by 27% in 2018 according to the Organization of Economic Cooperation and Development (OECD), and this drop followed a decline of 16% in the previous year. We have entered a new period of contraction by multinational firms, and in particular, U.S.-based multinationals.

A significant amount of the decline is due to firms based in the U.S. responding to changes in U.S. tax law. The U.S.-based firms repatriated earnings that had been kept abroad to avoid U.S. taxes. As a result, the U.S. recorded a negative FDI outflow of $50 trillion in 2018, down from a positive outflow of $379 billion in the previous year. By the latter half 2018, the acquisition of foreign assets had returned to positive levels, but the long-run changes of the tax code revision on the foreign operations of U.S. firms will only become clear over time.

Ireland and Switzerland were particularly hard-hit by the disinvestments, since these countries had often attracted FDI because of generous tax provisions. There were also reversals of investment in Special Purpose Entities (SPE), which allow the multinationals to channel funds through countries with favorable regulatory and tax practices to their ultimate destination. The OECD reported that FDI flows to SPEs in Luxembourg and the Netherlands fell to negative levels last year.

 

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